The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Robyn Mak

HONG KONG, April 30 (Reuters Breakingviews) - China's order for Meta Platforms META.O to reverse its $2 billion acquisition of Singapore-based Manus is a bold attempt to exert extraterritorial power. But the saga also spotlights a weak link in the country's artificial intelligence sector: a scarcity of funding available to Chinese startups.

Chief among the long list of official grievances was that Manus had "cut ties" with its Chinese roots by moving to Singapore after securing U.S. investment – presumably referring to a funding round led by U.S. venture firm Benchmark Capital – per a lengthy editorialin the state-owned Global Times. That Manus' core data and early research and development "originated" in China makes any foreign investment into the company, or cross-border transfers of tech or data, subject to Beijing's approval, the article added.

The government is tightening its grip on the country's AI talent and intellectual property. Officials also told private firms, including AI labs Moonshot and StepFun, to reject U.S.-origin capital unless approved, Bloomberg reportedearlier this month, citing sources. Foreign-funded private equity firms were already wary about potential sensitivities of tapping such assets, and this will further squash their appetite.

The problem is, Chinese founders have few options to raise funds, thanks to a sharp decline in foreign investment into the People's Republic since around 2023, especially from U.S. investors who were once key providers of venture capital. Last year, Chinese private AI investment was just $12.4 billion, per a Stanford University report, a fraction of the $286 billion in the United States. Indeed, the difficult fundraising environment probably contributed to Manus' decision to leave China.

China has attempted to step in, with government entities accounting for nearly all of the top investors among the 1,200 new ​yuan-denominated venture funds created in the first quarter of this year. It's a daring use of public capital given that most startups fail and very few turn into profitable businesses that will deliver a healthy return.

The funding squeeze adds to other major bottlenecks, such as Washington's export controls which throttle Chinese companies' access to high-end chips. U.S. rivals OpenAI and Anthropic face no such capital or chip constraints.

Manus was founded in 2022 shortly before net foreign direct investment into the world's second-largest economy slumped to a 30-year low. The next problem for Beijing may be a paucity of Chinese AI stars to aggressively defend.

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CONTEXT NEWS

China's National Development and Reform Commission on April 27 ordered Meta's $2 billion-plus acquisition of Singapore-based Manus to be unwound under Beijing's national security review mechanism of foreign investments that came into effect in ‌2021.

Meta acquired Manus in December in a deal that valued the China-founded company between $2 billion and $3 billion, Reuters reported at the time, citing sources. In May 2025, Manus raised $75 million in a funding round led by U.S. venture firm Benchmark Capital. The company then shut its China offices in July, laying off dozens of employees before moving to Singapore.

Manus' two co-founders, CEO Xiao Hong and chief scientist Ji Yichao, were summoned to Beijing for talks with regulators in March and later barred from leaving ​the country, Reuters reported, citing five sources familiar.

An article from China's state-backed Global Times published April 28 said that the issue was not the location of Manus' incorporation or management team but ​rather "the extent of its connections to China in terms of technology, talent, and data", as well as whether the transaction could jeopardise China's industrial security and development interests.